annual report 2011 en

Annual Report 2011

S. KHONKAEN FOODS PUBLIC COMPANY LIMITED

Contents

Page

Message from the Chairman 1

Message from the Chief Executive Officer 3

General Information 4

Summary of the Financial Information of the Company 5

Nature of Businesses of the Company 9

Risk Factors 14

Shareholding Structure and Management 17

Corporate Governance 19

Related Transactions 22

Description and Analysis of Financial Status and Operating Performance 23

Financial Statement 29

1 |Page

Message from the Chairman

To Shareholders

The year 2011 was considered to be a challenging period for S.

Khonkaen Foods Plc. and its subsidiaries. The catastrophic flood had

affected both business and household sectors. For the household

sector, the problems arose out of losses of properties, and thus

diminishing wealth, temporary migration, insufficient basic factors for

livelihood, unemployment, and losses of lives. For the business sector,

many businesses had to be closed down due to the damage on their properties while many more

had to stop their operations for a considerable period of time.

As for the company, we have many offices and factories located in the vulnerable areas.

The company was aware of those risks and had prepared all the necessary preventive measures in

order to mitigate the damages that might occur. As a result, the company's assets were not

affected from such event. The company, in response to the arising food shortage problems,

managed to run its production line at its full capacity in order to ease the food problem of the

people. In addition, the company had donated its products to various state and private

organizations to be distributed to the people, which the company considered to be our social

responsibility.

For the performance of the company and its subsidiaries, we had total sales revenue of THB

1,682 million, which was a 12 percent increase from the year 2010 and also the highest level since

the company was founded. The success of the company can be attributed to the support of our

2 |Page

shareholders, our customers, our employees, and Executive Directors of the company. On behalf of

the Board of Directors, I would like to thank our shareholders and customers for your continuous

support. In addition, I would like to thank all of our management members and staffs for their

dedication. I would like to assure all of our shareholders that we will continue to manage our

businesses professionally with good corporate governance and commitment to social responsibility

in order to maintain our status as one of the leading Thai companies.

(Mr. Somchai Sakulsurarat)

Chairman of the Board of Directors

3 |Page

Message from the Chief Executive Officer

To Shareholders

The year 2011 was considered as the terrible year for Thailand

to confront the severe flood which has never happened before in our

history. The 2 out of 3 parts of the country were entirely under the

water while the flood in some places reached the roof-tops of the

houses as appeared in the newspapers, not to mention the serious

effects on the agricultural sector causing lots of damage and intensely

affecting the overall purchasing power of the country. For the Company, it seemed greatly fortunate

that none of our factories have faced with the heavy flood; however, the operations management

has become more difficult, such as the raw materials transportation to factories and the product

distribution to the market.

Despite all obstacles, our employees at all levels and departments are always determined

to collaborate with the Company on achieving our business goals successfully beyond all

expectations, that is to say, to accomplish the highest sales and profits. I would like to take this

opportunity to greatly thank all of you for your continued support.

(Mr. Charoen Rujirasopon)

Chief Executive Officer

4 |Page

General Information

Location of the Head Office: No. 259/13, Soi Pridi Banomyong 13,

Sukhumvit 71 Road (Pridi Banomyong),

Prakanong Nua Sub-Drict, Watthana District,

Bangkok 10110

Type of Business: Production and distribution of processed food

made from meat and sea foods

Registration Number: 0107537001811

Telephone Number: (02) 391–1010

Facsimile: (02) 391-1792

Website: http://www.sorkon.co.th

E-mail: [email protected]

Registered Capital: THB 242,550,000 divided into ordinary shares

of 24,255,000 shares

Total Paid – Up Shares: 8,085,000 shares

Par Value: THB 10.00 per share

Number of Subsidiaries: 3 companies

Trading Symbol: SORKON

5 |Page

Summary of the Financial Information of the Company

Balance Sheet

As At

31 December 2011 31 December 2010 31 December 2009

THB in

Million Percent

THB in

Million Percent

THB in

Million Percent

Current Assets 467.33 40 408.52 38 338.40 34

Non – Current Assets 709.63 60 657.83 62 661.59 66

Total Assets 1,176.96 100 1,066.35 100 999.99 100

Current Liabilities 756.48 64 711.32 67 680.41 68

Non – Current Liabilities 84.03 7 53.42 5 69.22 7

Total Liabilities 840.51 71 764.74 72 749.63 75

Shareholders’ Equity 336.44 29 301.61 28 250.36 25

Statement of Income

Year Ended

2011 2010 2009

THB in

Million Percent

THB in

Million Percent

THB in

Million Percent

Revenue from Sales 1,682.01 99 1,504.87 98 1,199.15 99

Other 18.12 1 23.95 2 14.22 1

Total Revenue 1,700.13 100 1,528.82 100 1,213.37 100

6 |Page

Statement of Income

Year Ended

2011 2010 2009

THB in

Million Percent

THB in

Million Percent

THB in

Million Percent

Operating Income 115.79 7 94.68 6 93.77 8

Earnings before Financial Cost and

Corporate Income Tax 115.79 7 94.68 6 77.45 6

Operating Profit after Tax 51.30 3 51.44 3 37.41 3

Minority Interest 0.47 0 1.68 0 0.53 0

Net Profit 50.83 3 49.76 3 36.88 3

Earnings per Share 7.87 8.07 6.14

Statement of Cash Flow

Year Ended

2011 2010 2009

THB in Million THB in Million THB in Million

Net Cash Flows from Operating Activities 110.83 66.85 132.86

Net Cash Flows from Investing Activities (69.96) (16.12) (76.35)

Net Cash Flows from Financing Activities (36.85) (46.73) (57.22)

Net Increase in Cash and Cash Equivalents 4.02 4.00 (0.71)

Cash and Cash Equivalents at Beginning of the Period 6.18 2.18 2.90

Cash and Cash Equivalents at Ending of the Period 10.20 6.18 2.19

7 |Page

Financial Ratios Year Ended

2011 2010 2009

Liquidity Ratios

Current Ratio (Times) 0.62 0.57 0.50

Quick Ratio (Times) 0.39 0.37 0.32

Cash Flow Ratio (Times) 0.15 0.10 0.20

Account Receivable Turnover (Times) 6.22 6.40 6.12

Average Collection Period (Days) 58 56 59

Inventory Turnover (Times) 8.30 9.89 9.93

Average Day's Sales in Inventory (Days) 43 36 36

Account Payable Turnover (Times) 9.64 9.26 8.52

Average Payment Period (Days) 37 39 42

Cash Cycle (Days) 64 54 53

Profitability Ratio

Gross Profit Margin (%) 26.77% 24.34% 28.52%

Operating Profit Margin (%) 6.05% 4.85% 8.14%

Net Profit Margin (%) 3.02% 3.36% 3.08%

Return on Equity (%) 16.08% 18.64% 15.97%

Efficiency Ratio

Return on Fixed Assets (%) 28.37% 29.08% 26.36%

8 |Page

Statement of Cash Flow

Year Ended

2011 2010 2009

THB in Million THB in Million THB in Million

Return on Assets (%) 4.57% 4.98% 3.87%

Total Assets Turnover (Times) 1.52 1.48 1.25

Financial Policy Ratio

Debt to Equity Ratio (Times) 2.50 2.54 2.99

Interest Coverage Ratio (Times) 1.84 1.39 1.23

Fixed Charges Coverage Ratio (Times) 4.38 1.10 4.76

Dividend Payout Ratio (%) 18.89% 15.10% 12.09

9 |Page

Nature of Businesses of the Company

The business operation of the group of companies is a manufacturer and distributor of

processed food made from pork, processed seafood, snack food from pork, ready-to-eat frozen

food, farming, distributing of breeding swine and finishing swine and quick-service restaurants. The

products of the group of companies will majorly be available within country and partially export to

meet the demands of ready-to-eat Thai food, which arise in foreign countries.

Business Structure of the Group of Companies

Businesses

Company

Processed

Foods Made

from Pork

Processed

Seafood

Snack

Foods

Ready-to-

Eat Frozen

Foods

Quick-Service

Restaurants

Swine

Farming

SORKON Production and

Distribution

Distribution Production

and

Distribution

Production

and

Distribution

Distribution

MFP Production

SKKF Distribution

SPS Production

and

Distribution

SORKON: S. Khon Kaen Foods Public Company Limited

MFP: Mahachai Food Processing Company Limited

SKKF: S.K.K. Food Company Limited

SPS: S. Pasusat Company Limited

10 |Page

Processed Food Made from Pork

Processed food made from pork is one of the major businesses of the Company and is the

first commercial business since the incorporation. Processed food made from pork produced by

both plants of SORKON, which are Bangplee Plant and Nakornpathom Plant, having SORKON and

SKKF as a market maker and distributor to all fresh-food market within the country within SORKON

is a market maker and distributing products through other channels consisting of major retailers

and convenience stores, representatives in up-country, dealers for direct sales to consumers and

international markets through importers in foreign countries, which are China, Hong Kong and

Macau.

Processed food made from pork consisting of dried shredded pork, sliced sheets of dried

and crispy pork, pork sausage, Esan sausage, white pork sausage, pork ball, and others.

Processed food made from pork comes from original equipment manufacturer (OEM) and

manufacturer under its brand with the ratio of 7:93. Processed food made from pork of the

Company is under the brands of “S. Khonkaen” “Moo-dee” “Moo Hoar” “Huay Kaew” “Bann Pai” and

“3 Rien Thong”.

Processed Seafood

Processed seafood is another one of the major business of the Company, manufactured by

plant of MFP having SORKON and SKKF as a market maker and distributor, having SKKF as a

market maker and distributor to all fresh-food market within the country while SORKON is a market

maker and distributing products through other channels consisting of major retailers and

11 |Page

convenience stores, representatives in up-country, dealers for direct sales to consumers and

international markets through importers in foreign countries, which are the United States of America,

Europe, Japan and Korea. Currently production for export is 15 percent, production for domestic

sales through fresh-food market channel is 50 percent and through modern trade is 35 percent.

Processed seafood consisting of fish ball as it is graded for quality of upper market and

lower market, shrimp ball and squid ball. Presently, the Company is the biggest manufacturer of

seafood ball in the country with the market share in excess of 80 percent. In addition the Company

has a plan to launch new products in this business line by investing in machinery in the late 2010

and expects that the Company is able to manufacture new products within 2011.

Processed seafood of the Company comes from manufacturer under its brand and original

equipment manufacturer (OEM) with the ratio of 96:4. Processed seafood is under the brand of

“Chiu Chow”, “Kwang Chow”, “Kow Loon”, “Mahachai”, “O-Deng”, “Yowarat”, “Heng Heng”, “Kai-Zen”,

and “YUMI”.

Chili sauce and sauce are included in processed seafood business line as its raw materials

are shrimp and fish and having manufacturing at plant of MFP, which is a subsidiary, and all is

under brands of “Thai Derm” and “Thai Niyom” of the Company. The Company is a market maker

and distributor through channel of modern trade. Sauce is a minor product to processed seafood of

the Company. In 2011 the sales of chili sauce and sauce is approximately THB 27.81 million or 8.29

percent growth from 2010.

12 |Page

Snack Food Made from Pork

Snack food made from pork manufactured at Bangplee Plant of SORKON. SORKON is a

market maker and appoints Diethelm Company Limited to be its distributor agent. Snack food made

from pork consisting of bacon, snack of sliced sheets of dried and crispy pork, sliced sheets of

dried and crispy fish, sliced sheets of dried and crispy shrimp under its brand of “Entree”. Presently

sales within country are more than 92 percent.

Ready-to-Eat Frozen Food

Ready-to-eat frozen food is manufactured by another plant that locates in Samutsakorn

Industrial Estate, which had been purchased from Narai Inter Food Company Limited. Presently all

production is under original equipment manufacturer (OEM), 79 percent for export and 21 percent

for domestic market. Important foreign markets are Hong Kong, England and Germany as well as

countries in Europe and the United States of America. The products of the Company include frozen

food for both meals and desserts.

Quick-Service Restaurants

The Company has investment in Quick-Service Restaurants in 2010 namely “Zaap Express”. The

restaurant sells the company's products. The first branch is at the front area of Bangplee Plant. And then it’s

expands into other areas. The Company has 3 restaurants in 2011 and will continuously open restaurant. The

Company expects the restaurant to be an important distribution channel for its products in the future when the

13 |Page

company expands more branches of the restaurant comprehensively through franchise system and invested by

the company.

Farming and Distributing of Swine

The Company has a swine farm at Korat by using the sows from foreign countries for

bleeding to have bleeding swine for sales to sell to swine keepers. In addition, there is a selling of a

finishing swine in childhood to the keepers for farming and also an adult finishing swine to the

slaughterhouses. Swine farming is to support the using of pork as a raw material for the business of

processed food made from pork of the Company.

14 |Page

Risk Factors

Financial Risks

The Company is exposed to financial risks in changing interest rates and the volatility of

exchange rates. The changing interest rates affect the business operation and cash flow of the

Company as bank loan is an important source of fund for the Company. The Company has

mitigated the financial risk by using sources of funds with longer credit terms, i.e. project financing,

to finance the business expansion of both our operations and the operations of our subsidiaries.

This enables the company to be able to manage cash flow more efficiently.

In addition, the Company is exposed to exchange rate risks from the sales abroad. The

Company has hedged only parts of its foreign exchange exposure as the level of export sales is still

relatively low.

Labor Shortage

As the production of the Company requires intensive labor in processing of raw materials,

local labor force and their expertise is key to the manufacturing. The Company always employs

various incentive policies, including wages, welfare, and other benefits, in order to attract and

maintain these workforces. In addition, the Company also focuses on training our employees in

order to gain good understanding of every production process. Moreover, in 2011 the Company

had started to implement its long-term plan to make its production line more automated, and thus

requiring less labor. The company has already installed some of new machinery in 2011 and

15 |Page

expects to completely finish the installation of the new machine in 2012, which will reduce the

number of workforce needed by 30 percent.

The Volatility in Costs of Production

Major costs of production are raw materials and wages. The volatility in raw material prices,

especially continuously increasing fuel prices and animal feeds, has a direct effect on swine

farming business. Increased demands for crops, which are used to produce animal feeds, from

ethanol producers, result in higher prices of animal feeds. Higher fuel prices result in higher

transportation costs. Other factors affecting the fluctuating prices of pork consist of demand for

pork consumption, productivity of swine farms, drought conditions and animal diseases. In addition,

increasing minimum wages and benefits also affects directly the costs of production. If the

Company is unable to increase its selling prices in compliance with the rising costs, it will result in

the declining profitability of the Company.

During the period of high costs of production, the company stays competitive through

improved operating efficiency, including inventory management, long-term plan in streamlining

production. In addition, the company plans to utilize its vacant land into crop farming to be used as

animal feeds for its swine farm.

The Swine Flu

Swine diseases affect directly the farming revenues, raw material prices, and the consumer

confidence in food safety.

16 |Page

The company has been involved in doing research and development in order to improve

farm management, sanitation system, and quality control in order to ensure the safety of the

products to the consumers. In addition, the company has gain advantages in terms of its location,

the farm situates inside the ranges of mountains, which provide natural protection from the airborne

diseases.

The Risk Where the Major Shareholder is able to Control the Resolution of the Meeting of

Shareholders and Gains Management Power of the Company

Rujirasopon Family as a major shareholder of the Company holds shares of 57.25 percent of

total issued and paid-up capital of the Company so that Rujirasopon Family gains control on

administration of the Company and appoints representatives as the directors of the Company

including to have an ability to gather a majority of votes on shareholders issues, which have to

receive a majority of votes of total shareholders attending the meeting and entitled to vote. However

Rujirasopon Family has no right to vote in agenda, in which Rujirasopon Family has vested interest.

To have the administration and operation transparent, detectable and balance, the company has

appointed the outsiders as an independent directors and audit committee for the supervision. This

is in accordance with the good corporate governance according to guidance of the Stock

Exchange of Thailand.

17 |Page

Shareholding Structure and Management

Shareholding Structure (as of December 31, 2011) Major Shareholders Number of Shares %

1. Rujirasopon Family Mr. Chareon Rujirasopon Mrs. Niramol Rujirasopon Mr. Songkiat Rujirasopon Mr. Jaraspon Rujirasopon Mr. Jaranpoj Rujirasopon

4,628,779 2,067,500 1,974,999

565,950 12,058 8,272

57.25 28.67 24.43 7.00 0.15 0.10

2. The Subsidiaries S.K.K. Food Company Limited Mahachai Food Processing Company Limited

1,625,000 1,210,000

415,000

20.10 14.97 5.13

3. Pichettawanitchoke Family Mr. Tanathip Pichettawanitchoke Miss Winthinee Pichettawanitchoke Mr. Suwit Pichettawanitchoke Mrs. Wipaporn Pichettawanitchoke

288,100 146,800 70,000 63,300

8,000

3.57 1.82 0.87 0.78 0.10

4. KIM ENG SECURITIES PTE.LTD. 242,860 3.00 5. Mr. Ayut Charnsettikul 180,000 2.23 6. Mr. Sermchai Wirojkul 159,830 1.98 7. Thai NVDR Co., Ltd. 69,800 0.86 8. Mrs. Kiattinun Denpaisarn 58,600 0.72 9. Miss Aurapan Assamongkol 55,200 0.68 10. Thai Food Industry Company Limited 44,005 0.54

Total 7,352,174 90.93

Source: Thailand Securities Depository Co., Ltd.

18 |Page

Organization Chart

Director Sales

O

Director Local Sales

Director Marketing

3

Director QSR

Director F&B

Director Marketing1

Director Marketing

Deputy CEO Niramol

Secretary

Assistant CEO

Assistant CEO j

Director Academic

Director Production I (BangPlee)

Director Production II (Mahachai)

Technical

Director IT

Director HR and Admin.

Director Accounting &

General Manager Strategic Planning

Board of Acting President’s Office

Chief Executive Director

Audit Committee

Internal Audit

Board of

19 |Page

Corporate Governance

During the past years, the Company has always complied with the principles of good

corporate governance for listed companies as the Board of Directors and our executives are well

aware that good corporate governance is essential for developing the Company’s competitiveness

and creating trust in the Company's business amongst our investors, stakeholders and all relevant

parties. Thus, the Company establishes our policy of corporate governance as follows:

Rights of Shareholders

The Board of Directors includes in the corporate governance policy of the Company all the

statutory rights of shareholders and other appropriate rights; for example, to obtain

adequate information on the Company, to express their opinions and suggestions to the

Company, etc. Shareholders can contact the Company in many ways such as by

telephone, fax, mail or our web site.

Equitable Treatment of Shareholders

Shareholders can receive the Company’s information from either our or the Stock Exchange

of Thailand’s web site, in addition to documents mailed by The Thailand Securities

Depository Co., Ltd. as our registrar. In case shareholders cannot attend shareholders

meetings, they are able to specify their decisions or other suggestions to any other person

or member of the Audit Committee.

20 |Page

Role of Stakeholders

The Board of Directors sets a policy on fair treatment for each and every stakeholder. The

rights of stakeholders that are established by law or through mutual agreements are to be

respected. Any actions that can be considered in violation of stakeholders’ legal rights shall

be prohibited. In case the Company receives any concerns about illegal or unethical

practices, incorrect financial reporting, insufficient internal control, etc., the Company has

procedures to protect stakeholders regarding their communication of any concerns to the

board in order to ensure that the Company's operation has been conducted for the sake of

transparency and future reference.

Moreover, the Board of Directors defined a policy for maintaining on environmental and

social issues for our head office, factories and subsidiaries. The company’s production use

electricity most. Energy from petroleum fuel is used as a minority. Thus causing

contamination from petroleum fuel combustion in less.

The company has provided training on working environment (ISO14000) and update

locations around the company, an employee in a better environment, including hire private

company that received a concession properly according to the law and administrative

organization, to transport and to get rid of the garbage. Sewage from factories through

sewage treatment system and monitoring quality control of sewage standards before

draining into the public waterway. In addition, the company also hire consulting

environmental assessment to monitor and to control environmental consulting to the

company to ensure that the control environment as effectively.

21 |Page

Disclosure and Transparency

The Board of Directors shall ensure that all important information relevant to the Company

and its subsidiaries, both financial and non-financial, is disclosed correctly, accurately, on a

timely basis and transparently through easy-to-access channels that are fair and

trustworthy, such as the Company’s or the Stock Exchange of Thailand’s web site, etc.

Responsibilities of the Board of Directors

The Company’s Board of Directors consists of directors with various qualifications, which

are experience and expertise that are useful to the Company. Directors commit to their

responsibilities and put all time and efforts to encourage transparency and efficiency of the

Company’s management. The structure of the Board of Directors is composed of 4

independent directors or in the proportion of 1 out of 2 of the board size, which are divided

into 3 members of the Audit Committee and 1 Chairman. The Company does not set any

other subcommittees; however, the remuneration or nomination of board members and top

executives must be approved by the Board of Directors and independent directors

attending the meeting.

The Company shall have the board of directors’ meeting every 3 months and other meetings

as necessary. For the year 2011 (B.E. 2554), the Company held totally 6 meetings which

most of our directors attended.

22 |Page

Related Transactions

During 2011, the Company and its subsidiaries have the related transactions with directors

and major shareholder as follows:

The Necessity and Reasonableness of the Transaction

The entering of related transaction of the Company and its subsidiaries is to operate normal

business and support normal business of the Company, which has general terms and conditions.

Measure for Related Transactions

In doing related transaction of normal business either with outsiders or with person who may

have conflicts of interest, the Company has the same guidance of approval by concerning the

benefit of the Company as majority. For other related transactions, the Company agrees to have the

transaction must be reviewed by the Audit Committee to ensure that there is no conflict of interest,

the Audit Committee shall hire an independent appraiser or financial advisor for the valuation of

such transactions in comparison purpose then to present to the Board of Directors for further

consideration in approval.

Person Who may have

Conflicts of Interest Relationship Type of Major Related Transaction

Volume of

Transaction in 2011

1. Mr. Chareon Rujirasopon Major Shareholder

and Management

A subsidiaries rent for a land No. 44,

Moo 2, Phaya Yen Sub-District,

Pakc Chong District, Nakhon

Ratchasima Province, approximately

368 rai and 72 square wah.

THB 103,680

23 |Page

Description and Analysis of Financial Status and Operating Performance

Overview of Past Performance in the Preceding Year

2011 is the year at which the business of the Company has a high growth rate of sales of

12 percent from THB 1,505 million in 2010 to THB 1,682 million considered as the highest value

since the company has established due to the fact that in 2011, processed food from pork has

continuous growth rate.

The ready-to-eat frozen food had its first full year of production. The revenues from this

business in 2011 were THB 117 million, which was a decrease from THB 152 million in 2010. This

was the result of the Company’s policy to reduce operating risks. The purchase orders are normally

agreed at fixed prices, which expose the Company to price volatility of raw materials. In 2011,

prices of raw materials and packaging had increased significantly. Therefore, the Company

decided to slow down its export sales and concentrated more on domestic sales, which was more

profitable. In addition processed seafood business in 2011 has a growth rate of revenue of 14

percent or THB 66 million increasing. 2010 is also the year at which the Company expands

business to restaurant business with sales in 2011 of THB 9 million.

Selling and administrative expenses of 2011 is THB 348 million or 20.72 percent of sales

compared to selling and administrative expenses of 2010 at THB 293 million or 19.49 percent of

sales by having selling expenses of 9 percent of sales as same as the previous year while the

administrative expenses increases by 19.97 percent.

24 |Page

However, gross profit in 2011 of THB 450 million, or 26.77% of sales revenues, was higher

than that of 2010 by 2.43%. Its net profits after taxes in 2011 was higher than that of 2010 by 2.17%

due to changes in accounting standards, causing adjustment in expenses, e.g. employee benefits,

donation, and etc.

The maintaining of financial ratio as a condition by a financial institution of creditor specified

that the debt to equity ratio must not greater than 2 times.

Operating Performance of Each Business

Revenue structure of each business line

Item

2011 2010 2009

THB in

Million Proportion

THB in

Million Proportion

THB in

Million Proportion

Processed Food from Pork

Local 750.9 44.2% 624.4 40.8% 570.5 47.0%

Export 25.6 1.5% 21.6 1.4% 23.2 1.9%

Processed Seafood

Local 461.1 27.1% 392.3 25.7% 337.7 27.8%

Export 72.9 4.3% 75.5 4.9% 68.5 5.6%

Processed Snack Made from Pork

Local 94.9 5.6% 86.7 5.7% 68.3 5.6%

Export 8.5 0.5% 6.1 0.4% 4.5 0.4%

Ready-to-Eat Frozen Food

Local 92.3 5.4% 63.7 4.2% 6.2 0.5%

Export 24.8 1.5% 88.1 5.8% 5.7 0.5%

25 |Page

Item

2011 2010 2009

THB in

Million Proportion

THB in

Million Proportion

THB in

Million Proportion

Restaurants 8.8 0.5% 3.0 0.2% 0.2 0.0%

Revenue from Sales of Bleeding

Swine and Finishing Swine 142.2 8.4% 143.5 9.4% 114.3 9.4%

Total Revenue from Sales 1,662.0 98.9% 1,504.9 98.4% 1,199.1 98.8%

Other Revenue 19.1 1.1% 23.9 1.6% 14.2 1.2%

Total Revenue 1,700.1 100% 1,528.8 100% 1,213.4 100%

Processed Food from Pork Business

Revenue from sales in 2011 has a growth rate of 20.21 percent from THB 646 million in 2010

to THB 776.5 million in 2011 from an increasing in demand of the local market as a factor. Gross

profit margin of the business in 2010 is 37.9 percent or 2.3 percent increasing from 2010.

Processed Seafood Business

Revenue from sales in 2011 has a growth rate of 14.13 percent from THB 467.9 million in

2010 to THB 534 million in 2011 from an increasing in demand of both local and international

markets as a factor. Local sales growth for 17.53 percent while international sales decline for 3.51

percent. Gross profit margin of the business in 2011 is 22.7 percent or 4.0 percent increasing from

2010.

26 |Page

Processed Snack Made form Pork Business

Revenue from sales in 2011 has a growth rate of 11.34 percent from THB 93 million in 2010

to THB 103 million in 2011 from an increasing in demand of the local market as a factor with the

growth rate of 9.4 percent. Gross profit margin of the business in 2010 is 17.8 percent or 3 percent

decreasing from 2010.

Ready-to-Eat Frozen Food Business

Revenue from sales in 2011 decreased from THB 152 million in 2010 to THB 117 million in

2011 as the Company had decided to slow down its export sales. The Company manufactured

more OEM products this year. However, the Company plans to manufacture more of its own

premium brands this year.

Restaurant Business

Revenue from sales in 2011 has a growth rate of 198 percent from THB 3.0 million in 2010 to

THB 8.8 million in 2011. Gross profit margin of the business in 2011 is 45.9 percent or 3.4 percent

decreasing from 2010.

Distribution of Bleeding Swine and Finishing Swine Business

Revenue from sales in 2011 has a growth rate of -0.92 percent from THB 144 million in 2010

to THB 142 million in 2011. Gross profit margin of the business in 2011 is 8.9 percent or 3.7 percent

decreasing from 2010 by having cost of raw material, volatility of selling price and climate in some

periods inhospitable as the major factors.

27 |Page

The Analysis of Financial Position

Assets and Liquidity

As at 31 December 2011, total assets of the Company is THB 1,177 million consisting of

current assets of THB 467 million, property, plant and equipment of THB 347 million and other non-

current assets of THB 362 million.

The Company has a cash and cash equivalent of THB 10 million compared to THB 6 million

of 2010 as it is the cash flow from operating activities of THB 111 million decreasing by THB 67

million in 2010 as a result of the increasing in the using of working capital. In addition, the Company

has an additional investment in 2011 totaling THB 60 million from the acquisition of machinery for

the expansion in products of processed seafood business and the investment in restaurant

business. Cash flow used in financing activities in 2011 is consisting of the repayment for long-term

loan, liabilities under finance lease and hire-purchase and dividend payment of THB 10 million.

The current ratio in accordance with the consolidated financial statement as at 31

December 2011 is 0.62 times, which is close to 31 December 2010 of 0.57 times. The cash circle is

64 days increasing from the previous year at the average of 54 days.

Source of Fund

In 2011 the Company calls for additional short-term loan of THB 46 million in order to use as

a repayment of a current portion of long-term loan. Loan from financial institution as at 31

December 2011 is THB 593 million consisting of short-term loan of THB 525 million, long-term loan

of THB 55 million and liabilities under finance lease of THB 13 million. The proportion of short-term

28 |Page

loan to the total interest bearing debt increases by 3 percent from the structure of interest bearing

debt as at 31 December 2010. Net debt to equity ratio as at 31 December 2011 is 2.50 times

compares to 2.54 times as at 31 December 2010.

As at 31 December 2011, the shareholders’ equity is THB 336 million or 11.55 percent

increasing from the previous year.

29 | P a g e

S. Khon Kaen Foods Public Company Limited and its subsidiaries Report and consolidated financial statements 31 December 2011 and 2010

30 | P a g e

Report of Independent Auditor

To the Shareholders of S. Khon Kaen Foods Public Company Limited

I have audited the accompanying consolidated statements of financial position of S. Khon

Kaen Foods Public Company Limited and its subsidiaries as at 31 December 2011 and

2010, and the related consolidated statements of income, comprehensive income, changes

in shareholders’ equity and cash flows for the years then ended, and have also audited the

separate financial statements of S. Khon Kaen Foods Public Company Limited for the same

periods. These financial statements are the responsibility of the management of the

Company and its subsidiaries as to their correctness and the completeness of the

presentation. My responsibility is to express an opinion on these financial statements based

on my audits.

I conducted my audits in accordance with generally accepted auditing standards. Those

standards require that I plan and perform the audit to obtain reasonable assurance about

whether the financial statements are free of material misstatement. An audit includes

examining, on a test basis, evidence supporting the amounts and disclosures in the financial

statements. An audit also includes assessing the accounting principles used and significant

estimates made by management, as well as evaluating the overall financial statement

presentation. I believe that my audits provide a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material

respects, the financial position of S. Khon Kaen Foods Public Company Limited and its

subsidiaries and of S. Khon Kaen Foods Public Company Limited as at 31 December 2011

and 2010, and the results of their operations, and cash flows for the years then ended in

accordance with generally accepted accounting principles.

Without qualifying my opinion on the aforementioned financial statements, I draw attention to

Note 3 to the financial statements. During the current year, the Company adopted a number

of revised and new accounting standards as issued by the Federation of Accounting

Professions, and applied them in the preparation and presentation of its financial statements.

Sophon Permsirivallop

Certified Public Accountant (Thailand) No. 3182

Ernst & Young Office Limited

Bangkok: 27 February 2012

S. Khon Kaen Foods Public Company Limited and its s ubsidiaries

Statements of financial position

As at 31 December 2011 and 2010

(Unit: Baht)

Consolidated financial statements Separate financial statements

Note 2011 2010 2011 2010

Assets

Current assets

Cash and cash equivalents 9 10,204,633 6,186,079 1,769,578 1,167,760

Trade and other receivables 8, 10 284,303,841 256,463,089 274,503,695 245,957,165

Inventories 11 161,234,165 135,595,966 98,084,437 84,731,798

Dividend receivables 8 - - 37,122,853 -

Other current assets 11,589,162 10,273,960 7,194,630 7,096,754

Total current assets 467,331,801 408,519,094 418,675,193 338,953,477

Non-current assets

Restricted bank deposits 12 1,171,037 2,267,642 - -

Investments in subsidiaries 13 - - 223,077,559 223,077,559

Investment properties 14 332,089,099 332,979,701 62,530,000 61,060,000

Breeding stocks 15 7,409,673 10,034,738 - -

Property, plant and equipment 16 347,267,709 305,962,784 239,093,812 215,276,775

Intangible assets 17 13,465,544 960,086 12,920,018 376,213

Other non-current assets 8,224,026 5,623,418 8,209,026 5,534,458

Total non-current assets 709,627,088 657,828,369 545,830,415 505,325,005

Total assets 1,176,958,889 1,066,347,463 964,505,608 844,278,482

The accompanying notes are an integral part of the financial statements.


Statements of financial position (continued)


(Unit: Baht)


Note 2011 2010 2011 2010

Liabilities and shareholders' equity

Current liabilities

Bank overdrafts and short-term loans from financial institutions 18 524,504,185 501,083,526 356,150,068 343,062,431

Trade and other payables 8, 19 126,916,224 128,522,681 122,690,862 106,488,351

Current portion of financial lease payables 20 3,982,908 6,173,029 2,284,525 4,613,469

Current portion of long-term loans 21 13,920,000 21,735,044 13,920,000 21,735,044

Income tax payable 20,471,399 6,982,238 11,381,494 814,106

Other current liabilities 66,689,211 46,823,172 56,530,288 38,543,793

Total current liabilities 756,483,927 711,319,690 562,957,237 515,257,194

Non-current liabilities

Financial lease payables, net of current portion 20 8,959,261 10,659,875 6,794,078 7,610,967

Long-term loans, net of current portion 21 41,285,000 42,765,000 41,285,000 42,765,000

Provision for long-term employee benefits 22 33,786,303 - 21,865,724 -

Total non-current liabilities 84,030,564 53,424,875 69,944,802 50,375,967

Total liabilities 840,514,491 764,744,565 632,902,039 565,633,161



Statements of financial position (continued)


(Unit: Baht)


Note 2011 2010 2011 2010

Shareholders' equity

Share capital 23

Registered

24,255,000 ordinary shares of Baht 10 each

(31 December 2010: 8,085,000 ordinary shares of Baht 10 each) 242,550,000 80,850,000 242,550,000 80,850,000

Issued and fully paid

8,085,000 ordinary shares of Baht 10 each 80,850,000 80,850,000 80,850,000 80,850,000

Share premium 50,281,000 50,281,000 50,281,000 50,281,000

The Company's shares held by its subsidiaries (25,526,950) (25,526,950) - -

Retained earnings

Appropriated - statutory reserve 24 8,085,000 8,085,000 8,085,000 8,085,000

Unappropriated 105,323,683 93,971,161 94,678,649 63,510,901

Other components of shareholders' equity 110,503,395 86,822,444 97,708,920 75,918,420

Equity attributable to owners of the Company 329,516,128 294,482,655 331,603,569 278,645,321

Non-controlling interests of the subsidiaries 6,928,270 7,120,243 - -

Total shareholders' equity 336,444,398 301,602,898 331,603,569 278,645,321

Total liabilities and shareholders' equity 1,176,958,889 1,066,347,463 964,505,608 844,278,482

0 0 0 0


Director Director


Income statements

For the years ended 31 December 2011 and 2010

(Unit: Baht)


Note 2011 2010 2011 2010

Revenues

Sales 1,682,012,624 1,504,872,050 1,271,370,251 1,144,344,115

Other income 18,119,830 23,943,355 42,318,176 13,932,237

Total revenues 1,700,132,454 1,528,815,405 1,313,688,427 1,158,276,352

Expenses

Cost of sales 1,231,770,912 1,138,631,530 926,446,072 871,061,771

Selling expenses 156,929,094 133,632,730 138,296,096 116,913,748

Administrative expenses 191,507,617 159,630,541 144,748,332 121,263,084

Other expenses 4,130,602 2,247,288 1,770,000 6,053,568

Total expenses 1,584,338,225 1,434,142,089 1,211,260,500 1,115,292,171

Profit before share of income from investments in

associates, finance cost and corporate income ta x 115,794,229 94,673,316 102,427,927 42,984,181

Share of profit from investments in associates - 7,060 - -

Profit before finance cost and corporate income tax 115,794,229 94,680,376 102,427,927 42,984,181

Finance cost (34,993,807) (31,203,655) (25,183,344) (21,845,082)

Profit before corporate income tax 80,800,422 63,476,721 77,244,583 21,139,099

Corporate income tax (29,501,209) (12,043,965) (14,513,865) (3,515,722)

Profit for the year 51,299,213 51,432,756 62,730,718 17,623,377

Profit attributable to:

Equity holders of the Company 50,830,476 49,753,064 62,730,718 17,623,377

Non-controlling interests of the subsidiaries 468,737 1,679,692

51,299,213 51,432,756

Basic earnings per share 26

Profit attributable to equity holders of the Company 7.87 8.07 7.76 2.18



Statements of comprehensive income


(Unit: Baht)


2011 2010 2011 2010

Profit for the year 51,299,213 51,432,756 62,730,718 17,623,377

Other comprehensive income:

Gain on revaluation of land 21,790,500 - 21,790,500 -

Gain on revaluation of land of subsidiaries 1,890,451 - - -

Other comprehensive income for the year 23,680,951 - 21,790,500 -

Total comprehensive income for the year 74,980,164 51,432,756 84,521,218 17,623,377

Total comprehensive income attributable to:

Equity holders of the Company 74,455,111 49,753,064 84,521,218 17,623,377

Non-controlling interests of the subsidiaries 525,053 1,679,692

74,980,164 51,432,756



Cash flow statements


(Unit: Baht)


2011 2010 2011 2010

Cash flows from operating activities

Profit before tax 80,800,422 63,476,721 77,244,583 21,139,099

Adjustments to reconcile profit before tax to

net cash provided by (paid from) operating activities:

Depreciation - plant and equipment 41,371,039 36,980,121 28,500,485 25,346,011

Amortisation - intangible assets 555,090 278,009 479,294 219,880

Depreciation - breeding stocks 5,449,287 6,672,328 - -

Allowance for doubtful accounts (reversal) - 206,694 - (550,671)

Bad debt for short-term loan and interest receivable to related party 24,709 - - -

Decrease of inventory to net realisable value (reversal) 1,975,240 (233,724) 1,975,240 523,641

Gain on sales of equipment (412,334) (1,122,740) (151,315) (887,807)

Gain on sales of sows and boars (2,897,475) (890,794) - -

Donation of equipment 80 - 78 -

Allowance for impairment loss on assets 4,130,602 - 1,770,000 -

Write-off on assets 101,485 - - -

Loss on sales of investments in associates - 9,306 - 3,806,280

Gain on sales of other long-term investment - (6,144,052) - -

Share of income from investments in associates - (7,060) - -

Provision for long-term employee benefits 4,621,399 - 3,137,782 -

Unrealised (gain) loss on exchange (242,057) 49,770 (242,057) 49,770

Dividend income - - (37,122,853) (4,436,407)

Interest income (749,088) (696,554) (726,358) (506,741)

Interest expenses 34,993,807 31,203,655 25,183,344 21,845,082

Profit from operating activities before

changes in operating assets and liabilities 169,722,206 129,781,680 100,048,223 66,548,137

Operating assets (increase) decrease

Trade and other receivables (28,223,404) (24,785,465) (29,290,509) (23,373,597)

Inventories (27,613,439) (40,811,189) (15,327,879) (27,991,354)

Other current assets (1,315,202) (356,965) (97,876) (880,743)

Other non-current assets (2,600,608) 36,981 (2,674,568) 113,941



Cash flow statements (continued)


(Unit: Baht)


2011 2010 2011 2010

Operating liabilities increase (decrease)

Trade and other payable (1,606,457) 11,127,365 16,202,511 13,226,197

Provision for long-term employee benefits (997,888) - (707,528) -

Other current liabilities 19,476,987 1,064,984 17,942,645 1,665,316

Cash flows from operating activities 126,842,195 76,057,391 86,095,019 29,307,897

Cash paid for corporate income tax (16,012,048) (9,681,568) (3,946,477) (5,906,814)

Net cash flows from operating activities 110,830,147 66,375,823 82,148,542 23,401,083

Cash flows from investing activities

(Increase) decrease in restricted bank deposits 1,096,605 (1,231) - -

(Increase) decrease in short-term loan to related party - - 986,036 (1,021,512)

Cash paid for purchase of equipment (60,274,563) (33,918,349) (32,691,554) (21,105,659)

Cash paid for purchases of sows and boars (4,842,392) (3,286,592) - -

Cash paid for purchases of computer softwares (13,060,548) - (13,023,098) -

Cash received from sales of investment in associates - 2,737,875 - 2,737,875

Cash received from sales of other long-term investment - 13,741,849 - -

Cash received from sales of equipment 855,834 1,354,369 587,834 1,183,895

Cash received from sales of sows and boars 4,915,645 3,218,804 - -

Dividend received - - - 4,436,407

Cash received from interest income 1,349,088 512,740 726,358 506,741

Net cash flows used in investing activities (69,960,331) (15,640,535) (43,414,424) (13,262,253)



Cash flow statements (continued)


(Unit: Baht)


2011 2010 2011 2010

Cash flows from financing activities

Increase in bank overdrafts and short-term loans from

financial institutions 23,420,659 45,110,081 13,087,637 68,642,602

Decrease in long-term loans (9,295,044) (46,016,528) (9,295,044) (40,923,213)

Decrease in financial lease payable (6,339,934) (6,795,045) (4,657,899) (5,232,922)

Cash paid for interest expenses (34,946,943) (31,234,731) (25,139,494) (21,876,158)

Dividend paid to non-controlling interests of the subsidiaries - (31,589) - -

Dividend paid (9,690,000) (7,765,175) (12,127,500) (10,106,250)

Net cash flows used in financing activities (36,851,262) (46,732,987) (38,132,300) (9,495,941)

Net increase in cash and cash equivalents 4,018,554 4,002,301 601,818 642,889

Cash and cash equivalents at beginning of year 6,186,079 2,183,778 1,167,760 524,871

Cash and cash equivalents at end of year 10,204,633 6,186,079 1,769,578 1,167,760

- - - -

Supplemental cash flows information

Non-cash items transaction

Purchases of equipment by financial lease agreements 2,449,199 8,297,243 1,512,065 7,750,516

Adjustment of reserve for long-term employee benefits with the

beginning balance of retained earnings 29,787,954 - 19,435,470 -



Statements of changes in shareholders' equity


(Unit: Baht)

Total other Total equity Equity attributable

Issued and The Company's Surplus on Surplus on components of attributable to to non-controlling Total

fully paid-up shares held by Retained earnings revaluation revaluation of land shareholders' owners of interests of shareholders'

Note share capital Share premium its subsidiaries Appropriated Unappropriated of land of subsidiaries equity the Company the subsidiaries equity

Balance as at 31 December 2009 80,850,000 50,281,000 (33,124,747) 8,085,000 51,983,272 75,918,420 10,904,024 86,822,444 244,896,969 5,472,140 250,369,109

Total comprehensive income for the year - - - - 49,753,064 - - - 49,753,064 1,679,692 51,432,756

Dividend paid 28 - - - - (10,106,250) - - - (10,106,250) - (10,106,250)

Dividend paid in respect of the Company's shares

held by its subsidiaries - - - - 2,341,075 - - - 2,341,075 - 2,341,075

Dividend paid - net - - - - (7,765,175) - - - (7,765,175) - (7,765,175)

The Company's shares held by its subsidiaries - - 7,597,797 - - - - - 7,597,797 - 7,597,797

Decrease in equity attributable to non-controlling

interests of the subsidiaries - - - - - - - - - (31,589) (31,589)



Cumulative effect of change in accounting policy

for employee benefits 3, 5 - - - - (29,787,954) - - - (29,787,954) (374,838) (30,162,792)

Total comprehensive income for the year - - - - 50,830,476 21,790,500 1,890,451 23,680,951 74,511,427 525,053 75,036,480

Dividend paid 28 - - - - (12,127,500) - - - (12,127,500) - (12,127,500)

Dividend paid in respect of the Company's shares

held by its subsidiaries - - - - 2,437,500 - - - 2,437,500 - 2,437,500

Dividend paid - net - - - - (9,690,000) - - - (9,690,000) - (9,690,000)

Decrease in equity attributable to non-controlling

interests of the subsidiaries - - - - - - - - - (342,188) (342,188)


0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0


Consolidated financial statements

Equity attributable to owners of the Company

Other components of equity

Other comprehensive income


Statements of changes in shareholders' equity (cont inued)


(Unit: Baht)

Other components

of equity

Other comprehensive

Issued and income Total

fully paid-up Retained earnings Surplus on shareholders'

Note share capital Share premium Appropriated Unappropriated revaluation of land equity

Balance as at 31 December 2009 80,850,000 50,281,000 8,085,000 55,993,774 75,918,420 271,128,194

Total comprehensive income for the year - - - 17,623,377 - 17,623,377

Dividend paid 28 - - - (10,106,250) - (10,106,250)




for employee benefits 3, 5 - - - (19,435,470) - (19,435,470)

Total comprehensive income for the year - - - 62,730,718 21,790,500 84,521,218

Dividend paid 28 - - - (12,127,500) - (12,127,500)


0 0 0 0 0 0

0 0 0 0 0 0


Separate financial statements

41 | P a g e

S. Khon Kaen Foods Public Company Limited and its subsidiaries

Notes to consolidated financial statements


1. Corporate information

S. Khon Kaen Foods Public Company Limited (“the Company”) is a public company

incorporated and domiciled in Thailand. The Company is principally engaged in the

manufacture and distribution of processed food products. The registered office of the

Company is at 259/13 Soi Pridi Banomyong 13, Sukhumvit 71 Road (Pridi

Banomyong), Phrakanong Nuer, Vadhana, Bangkok.

2. Basis of preparation

2.1 The financial statements have been prepared in accordance with accounting standards

enunciated under the Accounting Professions Act B.E. 2547 and their presentation has

been made in compliance with the stipulations of the Notification of the Department of

Business Development dated 28 September 2011, issued under the Accounting Act

B.E. 2543.

The financial statements in Thai language are the official statutory financial statements

of the Company. The financial statements in English language have been translated

from the Thai language financial statements.

The financial statements have been prepared on a historical cost basis except where

otherwise disclosed in the accounting policies.

2.2 Basis of consolidation

a) The consolidated financial statements include the financial statements of S. Khon

Kaen Foods Public Company Limited (“the Company”) and the following

subsidiary companies (“the subsidiaries”):

Percentage directly

Country of and indirectly owned

Company’s name Nature of business incorporation by the Company

2011 2010

Percent Percent

S. Pasusat Company Limited Feeding and distribution Thailand 93 93

of breeding stock

S.K.K. Food Company Limited Distribution of food products Thailand 96 96

Mahachai Food Processing Manufacture and distribution Thailand 96 96

Company Limited of food products

42 | P a g e

b) Subsidiaries are fully consolidated, being the date on which the Company obtains

control, and continue to be consolidated until the date when such control ceases.

c) The financial statements of the subsidiaries are prepared using the same

significant accounting policies as the Company.

d) Material balances and transactions between the Company and its subsidiaries

have been eliminated from the consolidated financial statements.

e) Non-controlling interests represent the portion of profit or loss and net assets of

the subsidiaries that are not held by the Company and are presented separately

in the consolidated profit or loss and within equity in the consolidated statement

of financial position.

2.3 The separate financial statements, which present investments in subsidiaries under the

cost method, have been prepared solely for the benefit of the public.

3. Adoption of new accounting standards during the year

During the current year, the Company adopted a number of revised and new

accounting standards, issued by the Federation of Accounting Professions, as listed

below.

Accounting standards:

TAS 1 (revised 2009) Presentation of Financial Statements

TAS 2 (revised 2009) Inventories

TAS 7 (revised 2009) Statement of Cash Flows

TAS 8 (revised 2009) Accounting Policies, Changes in Accounting Estimates and

Errors

TAS 10 (revised 2009) Events after the Reporting Period

TAS 11 (revised 2009) Construction Contracts

TAS 16 (revised 2009) Property, Plant and Equipment

TAS 17 (revised 2009) Leases

TAS 18 (revised 2009) Revenue

TAS 19 Employee Benefits

TAS 23 (revised 2009) Borrowing Costs

TAS 24 (revised 2009) Related Party Disclosures

TAS 26 Accounting and Reporting by Retirement Benefit Plans

TAS 27 (revised 2009) Consolidated and Separate Financial Statements

TAS 28 (revised 2009) Investments in Associates

TAS 29 Financial Reporting in Hyperinflationary Economies

43 | P a g e

TAS 31 (revised 2009) Interests in Joint Ventures

TAS 33 (revised 2009) Earnings per Share

TAS 34 (revised 2009) Interim Financial Reporting

TAS 36 (revised 2009) Impairment of Assets

TAS 37 (revised 2009) Provisions, Contingent Liabilities and Contingent Assets

TAS 38 (revised 2009) Intangible Assets

TAS 40 (revised 2009) Investment Property

Financial reporting standards:

TFRS 2 Share-Based Payment

TFRS 3 (revised 2009) Business Combinations

TFRS 5 (revised 2009) Non-current Assets Held for Sale and Discontinued

Operations

TFRS 6 Exploration for and Evaluation of Mineral Resources

Financial Reporting Standard Interpretations:

TFRIC 15 Agreements for the Construction of Real Estate

Accounting Standard Interpretations:

SIC 31 Revenue-Barter Transactions Involving Advertising Services

These accounting standards do not have any significant impact on the financial

statements, except for the following accounting standards.

TAS 19 Employee Benefits

This accounting standard requires employee benefits to be recognised as expense in

the period in which the service is performed by the employee. In particular, an entity

has to evaluate and make a provision for post-employment benefits using actuarial

techniques. The Company and its subsidiaries previously accounted for such employee

benefits when they were incurred.

The Company and its subsidiaries have changed this accounting policy in the current

year and recognise the liability in the transition period through an adjustment to the

beginning balance of retained earnings in the current year. The change has the effect

of decreasing the profit of the Company and its subsidiaries for the year 2011 by Baht

4.62 million, (0.72 Baht per share) (Separate financial statements: decreasing profit by

Baht 3.14 million, or 0.39 Baht per share). The cumulative effect of the changes in the

accounting policy has been presented in Note 5 to the financial statements.

44 | P a g e

TAS 40 (revised 2009) Investment Property

This accounting standard requires entities to choose to recognise investment property

either under the cost model (with disclosure of fair value in the notes to financial

statements) or the fair value model, whereby changes in fair value are to be recognised

in profit or loss. Investment property was previously recognised under the caption of

Land awaiting for development, which is measured using the cost model. In adopting

the new accounting policy, the Company has changed Land awaiting for development

to Investment Property.

4. New accounting standards issued during the years not yet effective

The Federation of Accounting Professions issued the following new/revised accounting

standards that are effective for fiscal years beginning on or after 1 January 2013.

Accounting standards:

TAS 12 Income Taxes

TAS 20 (revised 2009) Accounting for Government Grants and Disclosure of

Government Assistance

TAS 21 (revised 2009) The Effects of Changes in Foreign Exchange Rates

Accounting Standard Interpretations:

SIC 10 Government Assistance - No Specific Relation to Operating Activities

SIC 21 Income Taxes - Recovery of Revalued Non-Depreciable Assets

SIC 25 Income Taxes - Changes in the Tax Status of an Entity or its Shareholders

The Company’s management believes that these accounting standards will not have

any significant impact on the financial statements for the year when they are initially

applied, except for the following accounting standards.

TAS 12 Income Taxes

This accounting standard requires an entity to identify temporary differences, which are

differences between the carrying amount of an asset or liability in the accounting

records and its tax base, and to recognize deferred tax assets and liabilities under the

stipulated guidelines.

At present, the management is evaluating the impact on the financial statements in the

year when this standard is adopted.

45 | P a g e

5. Cumulative effect of changes in accounting policies due to the adoption of new

accounting standards

During the current year, the Company made the changes to its significant accounting

policies described in Note 3 to the financial statements, as a result of the adoption of

revised and new accounting standards. The cumulative effect of the changes in the

accounting policies has been separately presented in the statements of changes in

shareholders’ equity.

The amounts of adjustments affecting the statement of financial position as at 1

January 2011 are summarised below.

(Unit: Thousand Baht)

1 January 2011

Consolidated

financial

statements

Separate

financial

statements

Statements of financial position

Increase in provision for long-term employee benefits 30,163 19,435

Decrease in non-controlling interests of the subsidiaries 375 -

Decrease in unappropriated retained earnings 29,788 19,435

6. Significant accounting policies

6.1 Income recognition

Sales of goods

Sales of goods are recognised when the significant risks and rewards of ownership of

the goods have passed to the buyer. Sales are the invoiced value, excluding value

added tax, of goods supplied after deducting discounts and allowances.

Interest income

Interest income is recognised as interest accrues based on the effective rate method.

Dividends

Dividends are recognised when the right to receive the dividends is established.

6.2 Cash and cash equivalents

Cash and cash equivalents consist of cash in hand and at banks, and all highly liquid

investments with an original maturity of three months or less and not subject to

withdrawal restrictions.

46 | P a g e

6.3 Trade accounts receivable

Trade accounts receivable are stated at the net realisable value. Allowance for doubtful

accounts is provided for the estimated losses that may be incurred in collection of

receivables. The allowance is generally based on collection experiences and analysis

of debt aging.

6.4 Inventories

Finished goods and work in process are valued at the lower of standard cost (which

approximates actual cost) and net realisable value. Standard cost includes all

production costs and attributable factory overheads.

Raw materials, chemicals, spare parts and factory supplies are valued at the lower of

average cost and net realisable value and are charged to production costs whenever

consumed.

6.5 Investments

a) Investments in non-marketable equity securities, which the Company classifies as

other investments, are stated at cost net of allowance for loss on diminution in

value (if any).

b) Investments in associates are accounted for in the consolidated financial

statements using the equity method.

c) Investments in subsidiaries and associates are accounted for in the separate

financial statements using the cost method.

The weighted average method is used for computation of the cost of investments.

In the event the Company reclassifies investments from one type to another, such

investments will be readjusted to their fair value as at the reclassification date. The

difference between the carrying amount of the investments and the fair value on the

date of reclassification are recorded in profit or loss or recorded as surplus (deficit)

from changes in the value of investments in shareholders’ equity, depending on the

type of investment that is reclassified.

On disposal of an investment, the difference between net disposal proceeds and the

carrying amount of the investment is recognised in profit or loss.

47 | P a g e

6.6 Investment properties

Investment properties are measured initially at cost, including transaction costs.

Subsequent to initial recognition, investment properties are stated at cost less

accumulated depreciation and allowance for loss on impairment (if any).

No depreciation is provided on land which treated as investment property.

On disposal of investment properties, the difference between the net disposal proceeds

and the carrying amount of the asset is recognised in profit or loss in the period when

the asset is derecognised.

6.7 Property, plant and equipment and depreciation

Land is stated at cost or revalued amount. Buildings and equipment are stated at cost

less accumulated depreciation and allowance for loss on impairment of assets (if any).

Land is initially recorded at cost on the acquisition date, and subsequently revalued by

an independent professional appraiser to their fair values. Revaluation is made with

sufficient regularity to ensure that the carrying amount does not differ materially from

fair value at the end of reporting period.

Differences arising from the revaluation are dealt with in the financial statements as

follows:

- When an asset’s carrying amount is increased as a result of a revaluation of the

Company’s assets, the increase is credited directly to the other comprehensive

income and the cumulative increase is recognised equity under the heading of

“Revaluation surplus on land”. However, a revaluation increase is recognised as

income to the extent that it reverses a revaluation decrease in respect of the

same asset previously recognised as an expense.

- When an asset’s carrying amount is decreased as a result of a revaluation of the

Company’s assets, the decrease is recognised in profit or loss. However, the

revaluation decrease is charged to the other comprehensive income to the extent

that it does not exceed an amount already held in “Revaluation surplus on land”

in respect of the same asset.

Depreciation of plant and equipment is calculated by reference to their costs on a

straight-line basis over the following estimated useful lives:

Building - 20 years

Machinery and equipment - 5 years

Furniture, fixtures and office equipment - 5 years

48 | P a g e

Motor vehicles - 5 years

No depreciation is provided on land and construction in progress.

Depreciation is included in determining income.

An item of property, plant and equipment is derecognised upon disposal or when no

future economic benefits are expected from its use or disposal. Any gain or loss arising

on disposal of an asset is included in profit or loss when the asset is derecognised.

The revaluation surplus can neither be offset against deficit nor used for dividend

payment.

6.8 Breeding stocks

For subsidiary, the breeding stocks are expected to have useful lives of three years.

The approximate resale value of boars and sows are about Baht 6,800 each.

6.9 Intangible assets

Intangible assets are initially recognised at cost. Following the initial recognition, the

intangible assets are carried at cost less any accumulated amortisation and any

accumulated impairment losses (if any).

Intangible assets with finite lives are amortised on a systematic basis over the

economic useful life and tested for impairment whenever there is an indication that the

intangible asset may be impaired. The amortisation period and the amortisation

method of such intangible assets are reviewed at least at each financial year end. The

amortisation expense is charged to profit or loss.

A summary of the intangible assets with finite useful lives is as follows:

Useful lives

Computer software 5 years

6.10 Related party transactions

Related parties comprise enterprises and individuals that control, or are controlled by,

the Company, whether directly or indirectly, or which are under common control with

the Company.

They also include associated companies and individuals which directly or indirectly

own a voting interest in the Company that gives them significant influence over the

Company, key management personnel, directors, and officers with authority in the

planning and direction of the Company’s operations.

49 | P a g e

6.11 Long-term leases

Leases of machinery and motor vehicles which transfer substantially all the risks and

rewards of ownership are classified as finance leases. Finance leases are capitalised

at the lower of the fair value of the leased assets and the present value of the minimum

lease payments. The outstanding rental obligations, net of finance charges, are

included in long-term payables, while the interest element is charged to profit or loss

over the lease period. The assets acquired under finance leases is depreciated over

the useful life of the asset.

Operating lease payments are recognised as an expense in profit or loss on a straight

line basis over the lease term.

6.12 Foreign currencies

Transactions in foreign currencies are translated into Baht at the exchange rate ruling

at the date of the transaction. Monetary assets and liabilities denominated in foreign

currencies are translated into Baht at the exchange rate ruling at the end of reporting

period.

Gains and losses on exchange are included in determining income.

6....13 Impairment of assets

At the end of each reporting period, the Company performs impairment reviews in

respect of the property, plant and equipment and other intangible assets whenever

events or changes in circumstances indicate that an asset may be impaired. An

impairment loss is recognised when the recoverable amount of an asset, which is the

higher of the asset’s fair value less costs to sell and its value in use, is less than the

carrying amount.

An impairment loss is recognised in profit or loss. However in cases where land was

previously revalued and the revaluation was taken to equity, a part of such impairment

is recognised in equity up to the amount of the previous revaluation.

In the assessment of asset impairment if there is any indication that previously

recognised impairment losses may no longer exist or may have decreased, the

Company estimates the asset’s recoverable amount. A previously recognised

impairment loss is reversed only if there has been a change in the assumptions used to

determine the asset’s recoverable amount since the last impairment loss was

recognised. The increased carrying amount of the asset attributable to a reversal of an

impairment loss shall not exceed the carrying amount that would have been

determined had no impairment loss been recognised for the asset in prior years. Such

50 | P a g e

reversal is recognised in profit or loss unless the asset is carried at a revalued amount,

in which case the reversal, which exceeds the carrying amount that would have been

determined, is treated as a revaluation increase.

6.14 Employee benefits

Short-term employee benefits

Salaries, wages, bonuses and contributions to the social security fund are recognised

as expenses when incurred.

Post-employment benefits

Defined benefit plans

The Company has obligations in respect of the severance payments it must make to

employees upon retirement under labor law. The Company treats these severance

payment obligations as a defined benefit plan.

The obligation under the defined benefit plan is determined by a professionally

qualified independent actuary based on actuarial techniques, using the projected unit

credit method.

Actuarial gains and losses arising from post-employment benefits are recognised

immediately in profit or loss.

For the first-time adoption of TAS 19 Employee Benefits, the Company elected to

recognise the transitional liability, which exceeds the liability that would have been

recognised at the same date under the previous accounting policy, through an

adjustment to the beginning balance of retained earnings in the current year.

6.15 Provisions

Provisions are recognised when the Company and its subsidiaries have a present

obligation as a result of a past event, it is probable that an outflow of resources

embodying economic benefits will be required to settle the obligation, and a reliable

estimate can be made of the amount of the obligation.

6.16 Income tax

Income tax is provided in the accounts at the amount expected to be paid to the

taxation authorities, based on taxable profits determined in accordance with tax

legislation.

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7. Significant accounting judgments and estimates

The preparation of financial statements in conformity with generally accepted

accounting principles at times requires management to make subjective judgements

and estimates regarding matters that are inherently uncertain. These judgements and

estimates affect reported amounts and disclosures; and actual results could differ from

these estimates. Significant judgements and estimates are as follows:

Leases

In determining whether a lease is to be classified as an operating lease or finance

lease, the management is required to use judgment regarding whether significant risk

and rewards of ownership of the leased asset has been transferred, taking into

consideration terms and conditions of the arrangement.

Allowance for doubtful accounts

In determining an allowance for doubtful accounts, the management needs to make

judgment and estimates based upon, among other things, past collection history, aging

profile of outstanding debts and the prevailing economic condition.

Fair value of financial instruments

In determining the fair value of financial instruments that are not actively traded and for

which quoted market prices are not readily available, the management exercise

judgment, using a variety of valuation techniques and models. The input to these

models is taken from observable markets, and includes consideration of liquidity,

correlation and longer-term volatility of financial instruments.

Impairment of equity investments

The Company treats available-for-sale investments and other investments as impaired

when there has been a significant or prolonged decline in the fair value below their cost

or where other objective evidence of impairment exists. The determination of what is

“significant” or “prolonged” requires judgement of the management.

52 | P a g e

Property plant and equipment/Depreciation

In determining depreciation of plant and equipment, the management is required to

make estimates of the useful lives and residual values of the Company’s plant and

equipment and to review estimate useful lives and residual values when there are any

changes.

The Company measures land at revalued amounts. Such amounts are determined by

the independent valuer using the market approach for land. The valuation involves

certain assumptions and estimates.

In addition, the management is required to review property, plant and equipment for

impairment on a periodical basis and record impairment losses in the period when it is

determined that their recoverable amount is lower than the carrying amount. This

requires judgments regarding forecast of future revenues and expenses relating to the

assets subject to the review.

Intangible assets

The initial recognition and measurement of intangible assets, and subsequent

impairment testing, require management to make estimates of cash flows to be

generated by the asset or the cash generating units and to choose a suitable discount

rate in order to calculate the present value of those cash flows.

Post-employment benefits under defined benefit plans

The obligation under the defined benefit plan is determined based on actuarial

techniques. Such determination is made based on various assumptions, including

discount rate, future salary increase rate, mortality rate and staff turnover rate.

8. Related party transactions

During the years, the Company and its subsidiaries had significant business

transactions with related parties. Such transactions, which are summarised below,

were concluded on commercial terms and bases agreed upon between the Company

and those related parties.

53 | P a g e


Consolidated Separate

financial statements financial statements

2011 2010 2011 2010 Transfer Pricing Policy

Transactions with subsidiaries

(eliminated from the consolidated financial

statements)

Sales of goods - - 25,847 25,702 Gross profit of 7% - 15%

Rental income - - 76 76 Rental of Baht 1,350 -

2,550 per month

Sales of fixed assets and supplies - - 103 460 Net book value

Service income - - 13 3,026 Agreed price

Dividend income - - 37,123 4,436 As declared

Rental expenses - - 54 54 Rental of Baht 4,500 per

month

Purchases of goods - - 219,635 207,402 Cost plus margin 5% -

20%

Purchases of fixed assets and supplies - - 185 189 Net book value

Transactions with associate

Interest income - 184 - - 6.65 - 6.75% p.a.

As at 31 December 2011 and 2010, the balances of the accounts between the

Company and those related companies are as follows:




2011 2010 2011 2010

Trade and other receivables - related parties (Note 10)

Subsidiaries - - 3,236 4,662

Trade and other payables - related parties (Note 19)

Subsidiaries - - 39,959 13,326

Dividend receivables - related parties

Subsidiaries - - 37,123 -

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Directors and management’s benefits

During the year ended 31 December 2011 and 2010, the Company and its subsidiaries

had employee benefit expenses payable to their directors and management as below.




2011 2010 2011 2010

Short-term employee benefits 57,272 51,913 42,986 39,227

Post-employment benefits 835 - 541 -

Total 58,107 51,913 43,527 39,227

Retirement benefits of the Company’s key management for 2010 were included in the

adjustment to the beginning balance of retained earnings for 2011, as described in

Note 5.

Guarantee obligations with related parties

The Company has outstanding guarantee obligations with its related parties, as

described in Note 29.3 (3) to the financial statements.

9. Cash and cash equivalents



2011 2010 2011 2010

Cash 239 243 73 23

Bank deposits 9,966 5,943 1,696 1,145

Total 10,205 6,186 1,769 1,168

As at 31 December 2011, bank deposits in saving accounts carried interests between

0.5 and 0.875 percent per annum (2010: between 0.1 and 0.5 percent per annum).

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10. Trade and other receivables

The balances of trade and other receivables as at 31 December 2011 and 2010, aged

on the basis of due date, are summarised below.




2011 2010 2011 2010

Trade receivables - related parties

Aged on the basis of due dates

Not yet due - - 3,165 3,605

Total trade receivables - related parties - - 3,165 3,605

Trade receivables - unrelated parties

Aged on the basis of due dates

Not yet due 253,081 223,833 250,311 220,598

Past due

Up to 3 months 19,704 15,722 11,048 9,401

3 - 6 months - 9 - 10

6 - 12 months - 16 - -

Over 12 months 467 472 467 470

Total 273,252 240,052 261,826 230,479

Less: Allowance for doubtful debts (500) (500) (500) (500)

Total trade receivables - related parties, net 272,752 239,552 261,326 229,979

Total trade receivables, net 272,752 239,552 264,491 233,584

Other receivables

Advances - related party - - 71 1,057

Interest receivable - 625 - -

Others 11,552 16,286 9,942 11,316

Total other receivables 11,552 16,911 10,013 12,373

Total trade and other receivables - net 284,304 256,463 274,504 245,957

The Company transferred rights of claim totaling Baht 100 million (2010: Baht 115

million) to financial institutions to secure short-term loans.

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11. Inventories



Cost

Reduce cost to net

realisable value Inventory-net

2011 2010 2011 2010 2011 2010

Raw materials and

packing materials 75,487 63,687 (3,829) (1,854) 71,658 61,833

Finished goods 48,335 33,407 - - 48,335 33,407

Work in process 720 10,650 - - 720 10,650

Supplies 2,792 2,063 - - 2,792 2,063

Breeding stocks

during feeding 37,729 27,643 - - 37,729 27,643

Total 165,063 137,450 (3,829) (1,854) 161,234 135,596



Cost

Reduce cost to net

realisable value Inventory-net

2011 2010 2011 2010 2011 2010

Raw materials and

packing materials 54,835 46,087 (3,829) (1,854) 51,006 44,233

Finished goods 46,358 40,499 - - 46,358 40,499

Work in process 720 - - - 720 -

Total 101,913 86,586 (3,829) (1,854) 98,084 84,732

12. Restricted bank deposits

These represent bank deposits pledged with the banks to secure against letter of

guarantee issued by those banks.

13. Investments in subsidiaries

Details of investments in subsidiaries as presented in separate financial statements are

as follow:

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Shareholding Dividend received

Company’s name Paid-up capital percentage Cost during the year

2011 2010 2011 2010 2011 2010 2011 2010

Percent Percent

S. Pasusat Company Limited 45 45 93 93 39,797 39,797 - -

S.K.K. Food Company Limited 120 120 96 96 108,533 108,533 19,964 4,436

Mahachai Food Processing 85 85 96 96 74,748 74,748 17,159 -

Company Limited

Total 223,078 223,078 37,123 4,436

14. Investment properties

The net book value of investment properties as at 31 December 2011 and 2010 is

presented below.




2011 2010 2011 2010

Land awaiting for development

Cost 358,191 358,191 82,271 82,271

Less: Allowance for diminution in value (26,102) (25,211) (19,741) (21,211)

Net book value 332,089 332,980 62,530 61,060

The fair value of the investment properties as at 31 December 2011 and 2010 stated

below:




2011 2010 2011 2010

Land awaiting for development 490,103 360,151 62,630 61,060

The fair values of the above investment properties have been determined based on

valuations performed by an accredited independent valuer. The fair value of the land

awaiting for development has been determined based on market prices.

As at 31 December 2011, the Company and its subsidiaries have mortgaged a plot of

land with a net book value of Baht 192 million (2010: Baht 193 million) with financial

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institutions to secure against loans of the Company and its subsidiaries (Separate

financial statements: Baht 62 million, 2010: Baht 61 million).

15. Breeding stocks



Sows Boars Total

Cost:

1 January 2010 20,898 504 21,402

Transfers in/purchase 3,041 487 3,528

Disposals/transfers out (6,050) (481) (6,531)

31 December 2010 17,889 510 18,399

Transfers in/purchase 4,638 204 4,842

Disposals/transfers out (8,362) (274) (8,636)

31 December 2011 14,165 440 14,605

Accumulated depreciation:

1 January 2010 (5,563) (91) (5,654)

Depreciation for the year (6,521) (151) (6,672)

Depreciation on disposals 3,839 123 3,962

31 December 2010 (8,245) (119) (8,364)

Depreciation for the year (5,282) (167) (5,449)

Depreciation on disposals 6,479 139 6,618

31 December 2011 (7,048) (147) (7,195)

Net book value:

31 December 2010 9,644 391 10,035

31 December 2011 7,117 293 7,410

Depreciation for the year

2010 6,672

2011 5,449

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16. Property, plant and equipment



Land and land

improvement

Buildings and

building

improvement

Machinery

and

equipment

Furniture,

fixtures and

office

equipment

Motor

vehicles

Construction

in progress Total

Cost / Revalued amount:

1 January 2010 138,308 217,376 220,411 35,866 37,056 9,689 658,706

Additions - 3,517 10,514 3,482 11,102 13,081 41,696

Disposals/Donations - (135) (515) (362) (6,021) - (7,033)

Transfers - 4,382 8,648 174 - (13,204) -

31 December 2010 138,308 225,140 239,058 39,160 42,137 9,566 693,369

Additions 770 1,888 9,712 4,669 3,589 42,096 62,724

Disposals/Donations - - (1,753) (523) (2,442) - (4,718)

Write-off - - - - - (102) (102)

Transfers 1,600 13,756 24,221 2,979 - (42,556) -

Revaluations 23,738 - - - - - 23,738

31 December 2011 164,416 240,784 271,238 46,285 43,284 9,004 775,011


1 January 2010 (2,660) (125,357) (173,616) (31,124) (20,733) - (353,490)

Depreciation for the year (216) (11,214) (18,597) (1,688) (5,265) - (36,980)

Depreciation on disposals - 112 515 357 5,817 - 6,801

31 December 2010 (2,876) (136,459) (191,698) (32,455) (20,181) - (383,669)

Depreciation for the year (232) (12,418) (20,039) (2,477) (6,205) - (41,371)

Depreciation on disposals - - 1,751 520 2,003 - 4,274

31 December 2011 (3,108) (148,877) (209,986) (34,412) (24,383) - (420,765)

Allowance for impairment loss:

1 January 2010 (3,737) - - - - - (3,737)

31 December 2010 (3,737) - - - - - (3,737)

Increase during the year (3,240) - - - - - (3,240)

31 December 2011 (6,977) - - - - - (6,977)

Net book value:

31 December 2010 131,695 88,681 47,360 6,705 21,956 9,566 305,963

31 December 2011 154,331 91,907 61,252 11,873 18,901 9,004 347,268


2010 (Baht 25 million included in manufacturing cost, and the balance in selling and administrative expenses) 36,980


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Land

Buildings and

building

improvement

Machinery

and

equipment

Furniture,

fixtures and

office

equipment

Motor

vehicles

Construction

in progress Total

Cost / Revalued amount:

1 January 2010 108,901 112,281 161,926 27,185 20,388 8,600 439,281

Additions - 2,817 3,875 2,483 9,680 9,782 28,637

Disposals - - - (60) (6,359) - (6,419)

Transfers - 2,549 7,651 175 - (10,375) -

31 December 2010 108,901 117,647 173,452 29,783 23,709 8,007 461,499

Additions - 1,132 7,789 4,254 2,044 18,984 34,203

Disposals - - (1,748) (480) (1,928) - (4,156)

Transfers - 6,598 9,079 2,865 - (18,542) -

Revaluation 21,791 - - - - - 21,791

31 December 2011 130,692 125,377 188,572 36,422 23,825 8,449 513,337


1 January 2010 - (65,697) (120,055) (23,938) (12,704) - (222,394)

Depreciation for the year - (5,964) (15,682) (1,167) (2,533) - (25,346)

Depreciation on disposals - - - 59 5,196 - 5,255

31 December 2010 - (71,661) (135,737) (25,046) (10,041) - (242,485)

Depreciation for the year - (6,702) (16,214) (1,838) (3,746) - (28,500)

Depreciation on disposals - - 1,745 480 1,494 - 3,719

31 December 2011 - (78,363) (150,206) (26,404) (12,293) - (267,266)

Allowance for impairment loss:

1 January 2010 (3,737) - - - - - (3,737)

31 December 2010 (3,737) - - - - - (3,737)

Increase during the year (3,240) - - - - - (3,240)

31 December 2011 (6,977) - - - - - (6,977)

Net book value:

31 December 2010 105,164 45,986 37,715 4,737 13,668 8,007 215,277

31 December 2011 123,715 47,014 38,366 10,018 11,532 8,449 239,094




The Company and its subsidiaries arranged for an independent professional valuer to

appraise the value of certain land in 2011. The basis of the revaluation was market

approach.

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Based on historical cost, their net book values as of 31 December 2011 and 2010

would have been as follows:




2011 2010 2011 2010

Land 46,874 46,874 32,983 32,983

As at 31 December 2011, the Company and its subsidiaries have equipment acquired

under financial lease agreement, with net book value amounting to approximately Baht

18 million (2010: Baht 24 million) (Separate financial statements: Baht 12 million, 2010:

Baht 17 million).

As at 31 December 2011, certain plant and equipment items have been fully

depreciated but are still in use. The gross carrying amount before deducting

accumulated depreciation of those assets amounted to approximately Baht 246 million

(2010: Baht 222 million) (Separate financial statements: Baht 178 million, 2010: Baht

156 million).

The Company and its subsidiaries have mortgaged a plot of land and building

constructed thereon and machineries with a total net book value as at 31 December

2011 of Baht 179 million (2010: Baht 184 million) as collateral for credit facilities

granted by commercial banks (Separate financial statements: Baht 141 million, 2010:

Baht 149 million).

17. Intangible assets


Computer software



Cost:

1 January 2010 7,448 7,045

Additions 519 218

31 December 2010 7,967 7,263

Additions 13,061 13,023

31 December 2011 21,028 20,286

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Computer software



Accumulated amortisation:

1 January 2010 (6,729) (6,667)

Amortisation for the year (278) (220)

31 December 2010 (7,007) (6,887)

Amortisation for the year (555) (479)

31 December 2011 (7,562) (7,366)

Net book value:

31 December 2010 960 376

31 December 2011 13,466 12,920

Amortisation for the year

2010 278 220

2011 555 479

18. Bank overdrafts and short-term loans from financial institutions



Interest rate financial statements financial statements

(percent per annum) 2011 2010 2011 2010

Bank overdrafts 6.00 - 7.15 91,561 58,541 63,207 43,920

Short-term loans from

financial institutions 2.85 - 6.50 432,943 442,543 292,943 299,142

Total 524,504 501,084 356,150 343,062

The above credit facilities of the Company are secured by the mortgage of the

Company’s land and building and by the guarantee of the Company’s directors.

The above credit facilities of its subsidiaries are secured by the mortgage of its

subsidiaries’ land and building, by the pledge of its subsidiary’s investment and bank

deposit, and by the guarantee of the Company and of its subsidiaries’ directors.

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19. Trade and other payables




2011 2010 2011 2010

Trade payables - related parties - - 39,959 13,326

Trade payables - unrelated parties 126,916 128,523 82,732 93,162

Total trade and other payables 126,916 128,523 122,691 106,488

20. Liabilities under finance lease agreements




2011 2010 2011 2010

Liabilities under finance lease 14,577 19,007 10,283 13,835

Less: Deferred interest expense (1,635) (2,174) (1,204) (1,611)

Total 12,942 16,833 9,079 12,224

Less: Portion due within one year (3,983) (6,173) (2,285) (4,613)

Liabilities under finance lease

agreement - net of current portion 8,959 10,660 6,794 7,611

The Company and its subsidiaries have entered into the finance lease agreements with

leasing companies for rental of machinery/ motor vehicles/ equipment for use in their

operation, whereby it is committed to pay rental on a monthly basis. The terms of the

agreements are generally between 3 to 5 years.

As at 31 December 2011, Future minimum lease payments required under the finance

lease agreements were as follows:-

(Unit: Million Baht)


Less than

1 year 1-5 years Total

Future minimum lease payments 4,696 9,881 14,577

Deferred interest expenses (713) (922) (1,635)

Present value of future minimum lease payments 3,983 8,959 12,942

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Less than

1 year 1-5 years Total

Future minimum lease payments 2,784 7,499 10,283

Deferred interest expenses (499) (705) (1,204)

Present value of future minimum lease payments 2,285 6,794 9,079

21. Long-term loans


Interest rate Principal due Interest due

Contract date (% per annum) for repayment for payment 2011 2010

22 March 2004 year 1-2: 4.0% every three months every three months 5,800 18,200

year 3-7: MLR

26 March 2008 7.6 - 8.4% every month every month - 541

13 March 2008 MLR every month every month - 389

26 November 2009 MLR every month every month 33,750 41,250

(start in June 2010)

12 November 2010 MLR every month every month 15,655 4,120

(start in June 2011)

Total 55,205 64,500

Less: Current portion (13,920) (21,735)

Long-term loans, net of current portion 41,285 42,765

The above long-term loans of the Company are secured by the mortgage of the

Company’s land and building and machineries and by the guarantee of the Company’s

directors.

The loan agreements contain covenants as specified in the agreements that, among

other things, require the Company to maintain certain debt to equity and debt service

coverage ratios according to the agreements.

22. Provision for long-term employee benefits

Provision for long-term employee benefits as at 31 December 2011, which is

compensations on employees’ retirement, was as follows:

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for employee benefits adjusted against

beginning balance of retained earnings (Note 5) 30,163 19,435

Current service cost 3,123 2,155

Interest cost 1,498 983

Benefits paid during the year (998) (707)

Balance at end of year 33,786 21,866

Long-term employee benefit expenses included in the profit or loss for the year ended

31 December 2011 amounted to Baht 4.6 million.

Principal actuarial assumptions at the valuation date were as follows:

2011

Consolidated financial

statements

Separate financial

statements

(% per annum) (% per annum)

Discount rate 4.32 - 4.41 4.36 - 4.41

Future salary increase rate 7.00 7.00

Staff turnover rate (depending on

age of employee)

0.00 - 94.00

6.00 - 31.00

23. Share capital

On 27 July 2011, an extraordinary general meeting of the Company's shareholders

approved an increase in its registered share capital from Baht 80.85 million to Baht

242.55 million, through the issuance of 16,170,000 ordinary shares with a par value of

Baht 10 each. Such shares are to be allocated to its existing shareholders at the ratio

of two new shares for one existing share at Baht 10. If there are share remaining from

the offering to the existing shareholders, the Company will allocate the residual to the

existing shareholders who subscribe to the newly issued shares in excess of their

allotted amount, in proportion to their respective shareholding at the same offering

price.

On 8 August 2011, the Company amended its memorandum of association to increase

in its registered share capital from Baht 80.85 million to Baht 242.55 million.

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24. Statutory reserve

Pursuant to Section 116 of the Public Limited Companies Act B.E. 2535, the Company

is required to set aside to a statutory reserve at least 5 percent of its net income after

deducting accumulated deficit brought forward (if any), until the reserve reaches 10

percent of the registered capital. The statutory reserve is not available for dividend

distribution.

25. Expenses by nature

Significant expenses by nature are as follow:




2011 2010 2011 2010

Salary and wages and other employee

benefits 267,587 236,750 185,019 166,948

Depreciation and amortisation 41,926 37,258 28,980 25,566

Rental expenses from operating lease

agreements 16,983 14,430 15,935 13,495

Raw materials and consumables used 1,002,309 799,830 814,444 641,897

Changes in inventories of finished goods

and work in progress 15,084 21,731 6,580 16,066

26. Basic earnings per share

Consolidated

Basic earnings per share is calculated by dividing profit for the year attributable to

equity holders of the Company (excluding other comprehensive income) by the

weighted average number of ordinary shares held by outside shareholders in issue

during the year by net from the treasury stock held by its subsidiaries, and adjusting

the number of ordinary shares in proportion to the change in the number of shares as a

result of the distribution of stock dividend. The number of ordinary shares of the prior

period has been adjusted as if the stock dividend had been distributed at the beginning

of the earliest period reported.

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Basic earnings per share is calculated by dividing profit for the year attributable to

equity holders of the Company (excluding other comprehensive income) by the

weighted average number of ordinary shares held by outside shareholders in issue

during the year and adjusting the number of ordinary shares in proportion to the

change in the number of shares as a result of the distribution of stock dividend. The

number of ordinary shares of the prior period has been adjusted as if the stock

dividend had been distributed at the beginning of the earliest period reported.

Basic earnings per share are calculated as follow:



2011 2010 2011 2010

Profit attributable to equity holder of

the parent (Baht) 50,830,476 49,753,064 62,730,718 17,623,377

Weighted average number of

ordinary shares (shares) 6,460,000 6,163,772 8,085,000 8,085,000

Earnings per share (Baht/share) 7.87 8.07 7.76 2.18

27. Financial information by segment

The operations of the Company and its subsidiaries involve the business segment of

manufacturing processed meat food products, and breeding and rearing of purebred

swine for sales to farmers. These activities are carried out in Thailand and oversea.

Income comes from both local and export sales.

Below is the consolidated financial information of the Company and its subsidiaries for

the years ended 31 December 2011 and 2010 by segment.

(Unit: Million Baht) Elimination of

Sales of foods Sales of inter-segment

products breeding stocks revenues Consolidation

2011 2010 2011 2010 2011 2010 2011 2010

Revenue from external customers 1,540 1,361 142 144 - - 1,682 1,505

Intersegment revenues - - - - - - -

Total revenues 1,540 1,361 142 144 - - 1,682 1,505

Segment income 437 348 13 18 450 366

Unallocated income and expenses:

Other income 18 24

Selling expenses (156) (134)

Administrative expenses (191) (159)

Other expenses (4) (2)

Financial expenses (35) (31)

Corporate income tax (30) (12)

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Non-controlling interests of the subsidiaries (1) (2)

Profit for the year 51 50


Elimination of

Sales of foods Sales of inter-segment

products breeding stocks revenues Consolidation

2011 2010 2011 2010 2011 2010 2011 2010

Property, plant and equipment 302 272 45 34 - - 347 306

Unallocated assets 830 760

Total assets 1,177 1,066

Transfer prices between business segments are as set out in Note 8 to the financial

statements.

28. Dividends

The Company declared dividends in years 2010 and 2011 as follows.

(Unit: Baht)

Approved by

Total

dividends

Dividend

per share

Dividends on 2009 income Annual General Meeting of the

shareholders on 26 April 2010 10,106,250 1.25

Dividends on 2010 income Annual General Meeting of the

shareholders on 29 April 2011 12,127,500 1.50

29. Commitments and contingent liabilities

29.1 Capital commitments

As at 31 December 2011, the Company and a subsidiary had capital commitments of

approximately Baht 11 million, relating to the construction of buildings and acquisition

of assets (Separate financial statements: Baht 7 million).

29.2 Operating lease and service commitments

The Company has entered into several lease agreements in respect of the lease of

land, office building space and service. The terms of the agreements are generally

between 1 and 9 years.

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As at 31 December 2011, future minimum lease payments required under these non-

cancellable operating leases contracts and service agreements were as follows.

Thousand Baht



Payable within:

Less than 1 year 17,692 13,771

1 to 5 years 23,103 22,865

More than 5 years 5,853 5,853

29.3 Guarantees

(1) The subsidiaries have pledged their bank deposits of approximately Baht 1 million

(2010: Baht 2 million) to secure against letters of guarantee issued by those

banks.

(2) A plot of land and building constructed thereon has been mortgaged with financial

institutions to secure loan of the Company and its subsidiaries.

(3) The Company has issued a guarantee against credit facilities with the total of

Baht 197 million (2010: Baht 197 million) obtained from financial institutions by its

subsidiaries.

(4) As at 31 December 2011, there were outstanding consolidated bank guarantees

of approximately Baht 3 million (2010: Baht 3 million) (Separate financial

statements: Baht 2 million, 2010: Baht 2 million) issued by the banks on behalf of

the Company and its subsidiaries in respect of guarantees as required in the

normal course of business.

30. Financial instruments

30.1 Financial risk management

The Company’s financial instruments, as defined under Thai Accounting Standard

No.107 “Financial Instruments: Disclosure and Presentations”, principally comprise

cash and cash equivalents, trade accounts receivable, loans, trade accounts payable,

bank overdrafts and loans from financial institutions. The financial risks associated with

these financial instruments and how they are managed is described below.

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Credit risk

The Company and its subsidiaries are exposed to credit risk primarily with respect to

trade accounts receivable, loans and other receivables. The Company and its

subsidiaries manage the risk by adopting appropriate credit control policies and

procedures and therefore do not expect to incur material financial losses. In addition,

the Company and its subsidiaries do not have high concentration of credit risk since it

has a large customer base. The maximum exposure to credit risk is limited to the

carrying amounts of trade accounts receivable, loans and other receivables as stated

in the statement of financial position.

Interest rate risk

The Company and its subsidiaries’ exposure to interest rate risk relates primarily to its

cash at banks, loans to, bank overdrafts and loans from financial institutions.

However, since most of the Company and its subsidiaries’ financial assets and

liabilities bear floating interest rates or fixed interest rates which are close to the market

rate, the interest rate risk is expected to be minimal.

Foreign currency risk

The Company’s exposure to foreign currency risk relates primarily to its receivables

which are denominated in foreign currencies.

As at 31 December 2011, significant unhedged foreign currency-denominated assets

and liabilities are as follows:-

Foreign Financial Average exchange rate

currency assets as at 31 December 2011

(Baht per 1 foreign currency unit)

US dollar 100,103 31.4525

HK dollar 2,974,291 4.0333

Euro 5,040 40.5938

30.2 Fair values of financial instruments

Since the majority of the Company and its subsidiaries’ financial instruments are short-

term in nature or bear floating interest rates, their fair value is not expected to be

materially different from the amounts presented in the statement of financial position.

A fair value is the amount for which an asset can be exchanged or a liability settled

between knowledgeable, willing parties in an arm’s length transaction. The fair value is

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determined by reference to the market price of the financial instrument or by using an

appropriate valuation technique, depending on the nature of the instrument.

31. Capital management

The primary objective of the Company’s capital management is to ensure that it has

appropriate capital structure in order to support its business and maximise shareholder

value. As at 31 December 2011, the Group's debt-to-equity ratio was 2.50:1 (2010:

2.54:1) and the Company's was 1.91:1 (2010: 2.03:1).

32. Subsequent events

On 27 February 2012, the meeting of the Company’s Board of Directors approved a

cash dividend payment of Baht 3 per share, totaling not over than Baht 72,765.000.

Shareholders whose subscribe newly shares, described in Note 23 to the financial

statements, also have right to receive this dividend payment.

33. Reclassification

To comply with the Notification of the Department of Business Development relating to

the financial statement presentation as described in Note 3 and as the result of the

adoption of revised and new accounting standards as described in Note 5, certain

amounts in the financial statements for the year ended 31 December 2010 have been

reclassified to conform to the current year’s classification, without any effect to the

previously reported profit or shareholders’ equity.

34. Approval of financial statements

These financial statements were authorised for issue by the Company’s Board of

Directors on 27 February 2012.

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